In a dramatic move, the U.S. Federal Reserve Board cut its benchmark Fed Funds rate 3/4 percent today, to 3.50%. It also dropped the Discount Rate to 4.00% - 0.75% as well.
As we know from recent press, the Fed price reduction was anticipated - at the end of the month, and at their next regularly scheduled meeting. But the emergency move today comes in reaction to huge selloffs in foreign equity markets, built on fears of a recession here in the U.S. Considerable volatility, and perhaps a substantial early NYSE selloff, had been predicted this morning - as Dow stock futures dropped as many as 500 points before this morning's opening bell on Wall Street.
Will the Fed move reduce home mortgage rates? Perhaps - but, recently, 30-year rates have dropped somewhat, in anticipation of a 50 basis point Fed move later in the month. Also, many adjustable loans are tied to the international LIBOR rate, and these rate adjustments will not be impacted unless this international index moves in tandem.
Let's see what happens . . .
DEAN & DEAN'S TEAM CHICAGO